Amazi v. Atlantic Richfield Co. , 249 Mont. 355 ( 1991 )

No. 90-627
IN THE SUPREME COURT OF THE STATE OF MONTANA
WAYNE and TERESA AMAZI, et al.,
Plaintiffs,
ATLANTIC RICHFIELD COMPANY, a Delaware Corporation, CGG AMERICAN
SERVICES, INC., a Colorado Corporation, GRANT-NORPAC, INC., a
Delaware Corporation., et al.,
Defendants,
ATLANTIC RICHFIELD COMPANY,
Cross-Claimant, Respondent and Cross-Appellant,
GRANT-NORPAC, INC.,
Cross-Defendant, Appellant and Cross-Respondent,
LONNIE AND PHYLLIS BROOKSHIRE, et al.,
Plaintiffs,
ATLANTIC RICHFIELD COMPANY, a Delaware Corporation., CGG AMERICAN
SERVICES, a Colorado Corporation, GRANT-NORPAC, INC., et al.,
Defendants,
ATLANTIC RICHFIELD COMPANY,
Cross-Claimant, Respondent and Cross-Appellant,
-vs-
GRANT-NORPAC, INC.,
Appellant and Cross-Respondent.
AUG 9 - 1991
CLERK 8 6 SUPREME COURS
STATE OF MONTANA
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Jeffrey Sherlock, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Rockwood Brown and Guy W. Rogers; Anderson, Brown,
Gerbase, Cebull, Fulton, Harman & Ross, Billings,
Montana.
For Respondent:
James M. Ragain and Kyle A. Gray; Holland and Hart,
Billings, Montana.
Submitted on briefs: June 28, 1991
~ecided: August 9, 1991
Filed:
I
' Clerk
Justice R. C. McDonough delivered the Opinion of the Court.
This appeal involves an indemnification dispute. The parties
involved were both defendants in two underlying suits. Appellant
and Cross-Defendant Grant-Norpac (GN) appeals the order of the
First Judicial District Court, Lewis and Clark County, granting
summary judgment to the Respondent and Cross-Claimant Atlantic
Richfield Company (ARCO) on its cross-claim for indemnification in
the underlying lawsuits. We affirm.
GN raises a sole issue on appeal:
Did the District Court err in granting summary judgment to
ARCO on its cross-claim for indemnification, including
indemnification for ARCOts own alleged negligence, based on the
language of the contract between the parties?
ARCO also raises an issue on cross-appeal:
Did the District Court err in not awarding ARCO its attorney's
fees expended to prove its cross-claim for indemnification?
This case arose out of seismic exploration in and around the
Helena Valley. On January 3, 1983, ARCO entered into an agreement
with GN, whereby GN was to conduct seismic testing activities for
ARCO for the purpose of mineral and oil exploration. Pursuant to
the agreement, ARCO would designate certain services it wanted GN
to conduct in locations designated by ARCO, with specific
instructions contained in a series of supplementary agreements.
In 1983 and 1984 GN ran shot-lines in the Helena Valley at
locations designated by ARCO. Shot-lines consist of a linear
series of sticks topped with explosives running in a particular
direction. The explosives are detonated simultaneously and the
velocities of the resulting shockwaves that pass through the ground
provide data that may be indicative of mineral or oil deposits in
the area. The contract indicates that the location of the shot-
lines and the equipment used, as well as specifications for the
work, were provided by ARCO.
About this same time two other companies, Geosource, Inc.,
and CGG American Services, Inc., were also conducting geophysical
surveys in the area, setting off similar explosive devices.
These suits arose when the plaintiff landowners sued ARCO, GN,
Geosource and CGG alleging that the exploration work of the
defendants had damaged their property. The landowners contended
that the use of above-ground explosives in the Helena Valley was
negligent.
GN and ARCO requested the District Court to interpret the
indemnity clause of the contract between the parties. The court
ruled that the indemnity provision required GN to indemnify ARCO
if the trier of fact determined that both ARCO and GN were
negligent to some degree; GN would not have to indemnify ARCO only
if the plaintiffsu injuries arose due to the sole negligence of
ARCO. ARCO offered the defense of this matter to GN in October of
1986. GN refused to defend. ARCO incurred in defending some
$64,000.00 worth of attorney's fees and costs. GN eventually
settled the plaintiffsv cases and obtained releases for itself and
ARCO. ARCO did not contribute to the settlements. ARCO moved for
summary judgment requesting that under the contract GN indemnify
ARCO for its attorney's fees and costs. The District Court granted
summary judgment ruling that ARCO was entitled to costs and fees
expended in defending the underlying claims, but not to the fees
expended in proving its contractual right to indemnification. GN
appealed from the orders granting ARCO1s indemnity claim and fees.
ARCO cross-appealed from the order denying its claim for costs and
fees expended in establishing its right to indemnification.
First, we note that this is an appeal from summary judgment.
Our standard of review is the same as that of the District Court
considering the motion. In order for summary judgment to issue,
the movant must demonstrate that there is no genuine issue as to
all facts deemed material in light of the substantive principles
entitling the movant to judgment as a matter of law. Rule 56(c),
M.R.Civ. P. ; Frigon v. Morrison-Maierle, Inc. (1988), 233 Mont. 113,
117, 760 P.2d 57, 60; Cerek v. Albertsonfs, Inc. (1981), 195 Mont.
409, 411, 637 P.2d 509, 511. If the movant meets this burden, the
burden then shifts to the non-moving party to demonstrate a genuine
issue of material fact. Friqon, 760 P.2d at 60. "Mere denial or
speculation will not suffice, the non-moving party must show facts
sufficient to raise a genuine issue." Frison, 760 P.2d at 60;
Gamble Robinson Co. v. Carousel Properties (1984), 212 Mont. 305,
312, 688 P.2d 283, 287.
I. GNls Appeal
In its opening brief, GN narrowly defines the issue on appeal:
We are not concerned with the remedy of contribution,
nor with the common law indemnity involving
active/passive negligence. This appeal relates solely
to whether ARCO has a right of contractual indemnity
against Grant-Norpac under the written agreement between
those parties. The issue can be narrowed even further
by stating that we are not concerned with any claimed
sole negligence on the part of ARCO which would allow
indemnity in favor of Grant-Norpac. The limited auestion
presented in this appeal is whether the indemnitv
provision of the Basic Asreement allows ARCO to recover
attornevs' fees and costs which were expended to defend
asainst claims of ARCO1sown direct neslisence. (Emphasis
added. )
For purposes of this appeal, GN has abandoned its argument below
that a genuine issue of material fact existed concerning whether
ARCO was solely negligent, which would allow indemnity in favor of
GN. Furthermore, GN concedes that it was partially negligent,
thereby eliminating questions of fact under the indemnity provision
of the contract. The only issue remaining involves the legal
interpretation of the indemnity provision in the contract. The
provision provides:
CONTRACTOR shall protect, indemnify, defend and save
CLIENT harmless from and against all claims, liabilities,
demands, causes of action and judgments (including costs
and reasonable attorneys fees) arising in favor of or
asserted by third parties on account of personal injury
or death or on account of damage to property, which
injury, death or damage is the result, in whole or in
part, of the negligent acts or omissions or willful
misconduct of CONTRACTOR, its employees, agents or
subcontractors. CLIENT shall protect, indemnify, defend
and save CONTRACTOR harmless from and against all claims,
liabilities, demands, causes of action and judgments
(including costs and reasonable attorneys fees) arising
in favor of or asserted by third parties on account of
personal injury or death or on account of damage to
property, which injury, death or damage is solely the
result of the negligent act or omissions or willful
misconduct of CLIENT, its employees and agents.
(Emphasis added.)
GN contends that while the provision requires GN to indemnify ARCO
for any negligence resulting in whole or in part from GN1s actions,
the contract does not indemnify ARC0 against its own negligence.
We disagree. In order for a contract to indemnify a party
against its own negligence, such indemnification must be expressed
in "clear and unequivocal terms." Sweet v. Colburn School Supply
(1982), 196 Mont. 367, 370-71, 639 P.2d 521, 523; Lesofski v.
Ravalli County Electric Cooperative (1968), 151 Mont. 104, 108, 439
P.2d 370, 372. In Sweet, this Court held that indemnity language
in a lease was not clear and unequivocal, noting that the language
in that case was not comparable to the indemnity language in Ryan
Mercantile Co. v. Great Northern Railway Company (9th Cir. 1961),
294 F.2d 629. In Ryan, the wife of an employee of Ryan was injured
while riding in a car when the car was struck by a boxcar being
pushed by a Great Northern locomotive. She only alleged negligence
on the part of Great Northern. The Ninth Circuit Court found that
Great Northern should be indemnified for its own negligence,
stating:
[I]n order to uphold an indemnification agreement for
damages caused by negligent acts of the indemnitee there
must be clear and unequivocal terms. . . . An
examination of the indemnity agreement discloses no
ambiguity. The phrases used--''any and all personal
injurieslt, Itof every name and nature which may in any
manner arisew, "whether due or not due to the negligence
of Great Northernn---demonstrate that Ryan's indemnity
would cover any claim made against Great Northern ...
and shows that the parties had in mind that the
negligence of Great Northern would be no bar to Ryan's
indemnity obligation.If
Ryan, 294 F.2d at 633. While the indemnity provision in this case
does not contain language exactly parallel to the language in Ryan-
-i.e., "whether due or not due to the negligence of ARCOW--when
both sentences of the provision are read together it is clear that
the provision requires GN to indemnify ARCO "against all claims,
liabilities, demands, causes of action and judgments (including
costs and reasonable attorneys fees" resulting "in whole or in
part" from "the negligent acts or omissions or willful misc~nduct``
of GN, its employees, agents or subcontractors. Under the
provision, liability attaches to ARCO only when ARCO is solely
negligent. Thus the provision clearly and unequivocally provides
that ARCO will not be indemnified against its own sole negligence,
but it will be indemnified where an injury is due to concurrent
negligence of ARCO and GN in any proportion. We conclude that the
District Court did not err in ruling that the indemnity provision
allows ARCO to recover attorneysf fees and costs expended to defend
against claims of ARCOts own direct negligence.
11. ARCO1s Cross-Appeal
On cross-appeal, ARCO alleges that the District Court erred
in not ruling that the indemnity provision also entitles ARCO to
indemnification for its costs and fees incurred proving its right
to indemnification. ARCO sought indemnity totaling $70,250.75.
$50,449.51 of this requested sum was expended in defending the
case. ARCO incurred the remaining $19,801.24 attempting to secure
indemnity from GN.
This is an issue of first impression in Montana. The majority
rule is that a party is not entitled to its fees and costs incurred
establishing its right to indemnity:
The general, and virtually unanimous rule appears to
limit the allowance of such fees to the defense of the
claim indemnified against and not to extend such
allowance for services rendered in establishing the
right to indemnification. 41 Am.Jur.2dt Indemnity, 5 36
(Supp. 1974); 42 C.J.S. Indemnity, 5 13d (1944). ...
[I]n the absence of exDress contractual terms to the
contrary, an indemnitee may not recover legal fees
incurred in establishing his right to indemnification.
Jones v. Strom Construction Co., Inc. (Wash. 1974), 527 P.2d 1115,
1119. ARCO contends that it should be entitled to recover its fees
incurred in establishing indemnification because a contract
provision providing for indemnification is similar to a contract
of insurance. We disagree. Here the indemnity provision is merely
one provision in a contract to perform geophysical exploration
bargained between the parties. It is not specifically a contract
for insurance. We adopt the majority rule that absent an express
contractual term an indemnitee may not recover attorneyst fees
incurred in establishing indemnity.
ARCO argues that Section IX, paragraph 3 of the agreement
constitutes such an express term and allows recovery for fees
incurred in establishing indemnity. The provision provides:
If indemnity is required by any of the terms of this
Agreement, the responsible party shall defend the other
and pay all settlements, judgments, costs, including
reasonable attorneys fees, and other related expenses
similar or dissimilar to the foregoing.
ARCO argues that such "related expensesw include attorneysw fees
incurred in establishing its contractual right to indemnification,
citing the rule that contracts for indemnification are to be
liberally construed in favor of the party intended to be
indemnified. See Capital Hill Shopping Center v. Miles (1977),
174 Mont. 222, 231, 570 P.2d 295, 298.
We disagree with this argument. While contracts of indemnity
are to be liberally construed in favor of the indemnitee, the
provision here is not in and of itself such a contract. Rather
it is a contract term allowing for recovery of certain attorneysf
fees. Under the majority rule just adopted, such a term must be
express in order for an indemnitee to recover legal fees incurred
in establishing its right to indemnification. We conclude that the
provision here is not sufficiently express, and affirm the District
Court's adoption of the majority rule regarding such fees.
The order of the District Court is
AFFIRMED.
We Concur: /'